Puerto Rico’s financial oversight board reached a tentative agreement with investors on how to reduce $18 billion of bond debt and is seeking additional time to file a formal adjustment plan to the court, Bloomberg News reported. The board yesterday asked a court overseeing Puerto Rico’s record bankruptcy to give the panel and creditors more time to finalize an accord, according to a court document. The board is seeking to file a debt restructuring plan by March 8. It had a Feb. 10 deadline to submit a plan or term sheet. The deal involves owners of more than $7 billion of Puerto Rico bonds who signed on to an earlier debt plan from February 2020, except for one firm that may no longer hold Puerto Rico securities, according to the court filing. The board didn’t provide any details, including prospective repayment amounts, but hopes to release such information “within a week,” according to the court filing. “We requested that the court grant more time to continue the mediation process, set down the agreed terms in a plan support agreement, and extend support for the agreement across a broad spectrum of creditor groups for a fair and affordable plan of adjustment that will enable Puerto Rico’s economy to grow and the people of Puerto Rico to prosper,” Natalie Jaresko, executive director of the oversight board, said in a statement yesterday. Read more.
In related news, the U.S. Court of Appeals for the First Circuit rejected three out of four legal challenges to the Puerto Rico Sales Tax Finance Corp. (COFINA) bond restructuring, which addressed the biggest stack of Puerto Rico bonds outstanding, The Bond Buyer reported. The appeals court judges found that the appellants had failed to seek stays or appeals of the approved bond restructuring — about $17.6 billion of debt — in a timely fashion and that the plan had advanced well beyond the point where it could be practically undone. On these bases the court upheld the restructuring plan on the basis of the legal doctrine of equitable mootness, which seeks to avoid undoing complex bankruptcy reorganizations. The three cases decided included two launched by holders of subordinate COFINA bonds, the Elliot and Peter Hein cases, and another spearheaded by a member of the Puerto Rico House of Representatives, the Pinto Lugo case. The appeals court panel released a single decision for three of the cases late on Monday. It hasn’t yet released a decision on Coop de Ahorro y Cred. de Rin, et al. v. Financial Oversight and Management Board for Puerto Rico. Title III bankruptcy Judge Laura Taylor Swain approved the restructuring of what was then $17.6 billion in COFINA bonds on Feb. 5, 2019. The deal went into effect Feb. 12, 2019. In it the new COFINA entity was given 53.65% of the revenue granted to the original entity. Claims for the senior and subordinate bonds were reduced. Read more.
